About that Robin Hood tax

The Financial Transition Tax (FTT) proposed by 11 EU countries (including France, Germany, Spain and Italy - but not Britain nor Sweden), coined the Robin Hood Tax is, conceptually, an old idea. The stamp duty, the oldest tax still in existence in the U.K., is a form of financial transaction tax. Keynes argued for the implementation of such a tax on Wall Street, and after the end of the Bretton Woods regime, Tobin proposed a tax on currency exchange.

The FTT supported by the EU 11 group is supposed to be implemented in 2014, but as mentioned earlier, it is not going to be so simple. If one steps away from the technicality of this new piece of legislation, it appears more clearly than it is also an attempt to "slow down the engine", to "throw some sand in the wheel of finance", as Tobin said. In this regards, this reform reflects the momentum taken by the idea that finance has to work for the economy.  It is finally getting acceptable to say that that the liquidity and volume of financial markets are not an end in itself. 

This reform and the reactions it triggered represents the tensions between risk management and investment. Keynes already voiced his concerns about this dilemma. On the one hand: “Liquidity of investment markets often facilitates, though is sometimes impedes, the course of new investment. For the fact that each individual investor flatters himself that his commitment is “liquid” (though this cannot be true for all investors collectively) calms his nerves and makes him much more willing to run a risk. If individual purchases of investments were rendered illiquid, this might seriously impede new investment” (Keynes, 1935:133). On the other hand he warned that “when the capital development of a country becomes a by-product of the activities of a casino”, which is the outcome of “our having successfully organized “liquid” investment markets, the job is likely to be ill-done” (Keynes, 1935:133).